November 11, 2013

How Much? A Battle Over The Cost Of The New Hepatitis C Drugs

Posted Mon, 11/11/2013 - 8:59am by Ed Silverman

As excitement mounts among physicians and investors over a new crop of drugs for treating hepatitis C, there is also concern that patients in developing countries may not have sufficient access due to high prices. But a recent poster presentation at a medical conference suggests that drugmakers can produce these new medicines for relatively little cost and should be compelled to do so.

The analysis, which was displayed at the American Association for the Study of Liver Diseases gathering last week in Washington, DC, concluded that large-scale production of direct acting antivirals may be possible for as little as $100 to $200 for 12 weeks of treatment. The estimate cited HIV drugs, which initially cost tens of thousands of dollar per patient but have since dropped in price, as a framework.

This group of drugs includes sofosbuvir, which is made by Gilead Sciences and was unanimously endorsed by an FDA panel last month. The treatment offers a higher cure rate with less toxicity and a shorter duration for treatment than a pair of medicines approved two years ago, which explains the enthusiasm on Wall Street, where pricing is expected at $80,000 to $90,000 per patient in the US.

The FDA panel voted in favor of approving sofosbuvir for patients with hepatitis C genotypes 2 and 3 in combination with an older medicine called ribavirin. If approved, the drug will be the first all-oral treatment for these strains. The panel also endorsed the drug for combating genotypes 1 and 4 in combination with ribavirin and interferon in patients who have not already received therapy. The vast majority of cases involve genotype 1.

“Gilead does not have expect to have high gross/net discounting in this segment, since they will not have a lot of competition initially and because the key driver of discounts is taking price increases over time,” wrote Citi analyst Yaron Werber in a recent investor note. The formal FDA approval date for this drug, by the way, is December 8.

Such pricing estimates are prompting worries that such medical advances will be out of reach for patients in poor countries – and perhaps some in the US - unless Gilead and the other drugmakers that are developing DAAs, a group that includes Bristol-Myers Squibb (BMY), AbbVie (ABBV), agree to sell their drugs for much lower prices.

“It only takes a few grams of these drugs to cure hepatitis C,” says Andrew Hill of Liverpool University, one of the researchers. “Companies have a choice: continue treating a very small number of people with hepatitis C at a very high cost, or expanding access to these treatments, lowering treatment costs significantly, and working towards eradication of this disease” (here is the analysis).

A key issue is that there are no international agencies or groups that purchase hepatitis C drugs for distribution to poor countries. Meanwhile, there are anywhere from 130 million to 150 million are infected worldwide. In the US, there are approximately 3 million to 4 million people infected with hepatitis C patients in the US, but less than 60,000 are being treated, according to Gilead.

In other words, demand is expected to mushroom, setting up a potential clash over availability. Even in the US, the situation is expected to become exacerbated as physicians await FDA approval for the newest drugs and more patients are found to be in need of treatment now that the US Preventive Services Task Force recommended testing for hepatitis C.

“If the current high prices continue, it is likely that very few people will be treated and the overall epidemic of hepatitis C in the USA will continue unchecked,” he writes us. “It is only by lowering the prices, and treating more people, that there could be a real change in the USA.”

In the analysis, Hill and a colleague assumed that the production cost per gram of a hepatitis C drug was between one to 10 times higher than the equivalent HIV antiretroviral, depending on the complexity of chemical synthesis. The production cost of sofosbuvir, for instance, was estimated at $68 to $136 for a 400mg dose for 12 weeks.

We asked Gilead (GILD) for comment and will update you accordingly.

In response, Doctors Without Borders, which hopes the oral DAAs can place the ease of treating hepatitis C on a par with treating HIV, issued a statement exhorting drugmakers to make their forthcoming medicines affordable on a large scale. If not, the advocacy group suggested that drugmaker may find themselves confronting countries willing to issue compulsory licenses.

“We urge companies expected to bring these drugs to market soon to price new hepatitis C regimens at below $500 in developing countries, and for countries affected by the disease to consider ways to overcome patent barriers to allow the production of more affordable generic versions,” says Manica Balasegaram, who heads the group’s Access Campaign

Hill acknowledged some limitations to the analysis. For instance, more precise estimates of production costs require pilot production batches and more detailed analysis of process chemistry. And access to DAAs at minimum prices in developing countries will depend on the level of enforcement of patent restrictions.


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